Leading article: An economy in need of a convincing growth plan

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The Independent Online

For those assessing the British economy, there is certainly no shortage of detailed information.

There is, however, also no clear pattern upon which a definitive judgement might be made. Indeed, in the past week alone, the conflicting signs have been altogether bewildering. The retail figures are stronger than expected, but the verdict of a credit agency is pessimistic. Inflation is slightly lower than some had feared, but unemployment is still growing, albeit at a slower rate than it was. Taken together, the only certainty in the cascade of data and related analysis has been that nothing is entirely certain.

Given the unremitting gloom of recent months, the current contradictory signals are rather a good sign. Most likely the relatively positive news on inflation and high street sales are connected. Inflation peaked at a rather nasty 5.2 per cent in September, before falling back to 3.6 per cent last month, helping consumers to find the idea of spending rather less daunting. Cue a healthy 0.9 per cent rise in retail sales during December and January, confounding the dismal predictions of the vast majority of economists.

That said, it is far from certain that the worst is over. The credit agency Moody's warned this week that the UK's triple-A rating was under threat because of the lack of growth. And that same flatlining in the economy largely explains why unemployment continues above 2.5 million and is still rising.

It is that lack of growth that should be keeping George Osborne awake at night as he prepares for his Budget next month. When he became Chancellor in 2010, he emphasised public spending cuts, with the expectation of a spontaneous recovery in the private sector to counter the decline in government activity. When the economy began to dip, he was too slow to respond. And his Growth Plan, launched with much ado in November, was too piecemeal – and too long term – to make any immediate impact.

In fairness to Mr Osborne, a large part of the solution to Britain's growth problem is out of his hands. Both his fate as Chancellor and that of the British economy will be partly determined by what happens within the eurozone, which remains by far the UK's biggest single export market. All routes are hazardous and potentially traumatic for Britain's economy, from a Greek default to a large-scale implosion. And even if the eurozone survives in its present form, there is no painless path to recovery either for the countries directly involved or for those with such close economic and financial links as Britain.

Mr Osborne nonetheless has rather more flexibility than he has yet put to use. Sadly, even if a double dip back into recession has been avoided, the Chancellor is still unlikely to grant Nick Clegg's request for a higher tax threshold for those on low incomes. But even within the Chancellor's fiscal conservatism, there is more that can, and must, be done to stimulate the economy.

The programme of major public building projects already announced is more than welcome. But it should be expanded – and targetted to help tackle Britain's chronic housing shortage – by bringing forward investment. Mr Osborne must also flesh out his much-vaunted "credit easing" scheme to boost lending to small business and set it to work. Similarly, efforts to unlock the vast cash reserves currently held on the balance sheets of companies that are too economically wary to invest must also be a priority.

Unless the Budget makes a more consistent, more ambitious and more tangible commitment to growth than Mr Osborne's tinkerings so far, then this week's darker economic data will overwhelm the tiny glimpses of light.